Stakeholder engagement

Engaging in strategic and proactive dialogue with our key stakeholders helps deepen our insights into the drivers of our business and the needs of society worldwide, and thus to be ahead of the competition in adapting to changing demands.

We value engaging with our stakeholders – customers, suppliers, investors, employees, companies, governments, academia and civil society – and reach out to them in order to maintain open discussions on topics relevant to our business activities and our role in society, and to align our strategy with their views. These groups have been identified based on their influence on DSM’s operations, as well as our effect on them. The outcomes from the various stakeholder dialogues inform many aspects of our strategy, such as risk management, the identification and pursuit of business opportunities, and the overall guidance of DSM’s strategic objectives and ambitions. Continuous dialogue with our stakeholders is pursued through a variety of channels. A non-exhaustive overview of our engagements with stakeholder groups is provided under Stakeholders.

Materiality

For DSM, materiality is about identifying the People, Planet and Profit topics that are most relevant to our stakeholders, and plotting these against the impact they have on our business. Business impact includes social, environmental, financial and reputational impact.

While material topics do not change substantially year-on-year, we consider it important to understand the views of both our internal and external stakeholders so as to verify whether we need to change our position on various issues. We announced our strategy update at the end of 2015, which was based on engagement with internal and external stakeholders. Our priority in 2016 was therefore to ensure that our materiality matrix was aligned with DSM’s Strategy 2018. The material topics from 2015 were challenged using a media and peer analysis process to capture emerging trends and headlines and to assess their alignment with DSM’s strategy and our Issues Management list. This procedure was supplemented by interviews with the Executive Committee aimed at identifying emerging trends, new topics, and changes in the relevance or priority of existing topics. The materiality matrix and the Corporate Risk Assessment were compared to confirm that all relevant subjects were covered from a materiality and/or risk perspective. The results of this exercise were validated by the Sustainability Leadership Team – a group of senior managers responsible for championing sustainability at DSM − and ultimately signed off by the Managing Board.

Changes in 2016

Two new topics for scrutiny were identified by this process in 2016: Digital transformation, and Geopolitical tensions & inequalities. The thematic areas Sustainable & Circular value chains, Bio-based economy and Sharing economy have been combined into a new category, Resource scarcity/Circular & bio-based economy.

Transparency has been renamed Transparency & reporting, Tax has been renamed Taxation, and Sustainable animal proteins has been renamed Sustainable food systems so as to include the climate impact of agriculture and sustainable alternative protein sources. Malnutrition & nutrition security now also encompasses overweight/obesity resulting from unhealthy diets.

Three of the four categories have been adjusted, with Societal shifts renamed Society, Eco Limits renamed Environment, and Trust & Accountability renamed Governance. Business enablers remains unchanged. Product & food safety has been moved to Governance. All topics are reported on, and our management approach explained below.

Society

Health & wellness

The world’s population is simultaneously growing and aging. We contribute to individual health & well-being, the prevention and/or reduction of diseases, and the enhancement of the quality of life through the offerings of our Nutrition, Materials and Biomedical businesses. We respond to discussions about healthy diets (including associated health risks and claims) and to the shift in consumer preferences (such as organic) through the management of our nutrition, food and personal care ingredients portfolio. We also see that a growing consumer preference for less processed products could pose a risk to our business. This topic aligns with SDG 3 (Good Health).

Management approach. Our Nutrition strategy targets trends in health & well-being and shifts in consumer diets, including reduced salt and sugar, and ‘free from’. Within our Biomedical Emerging Business Area (EBA), we partner with the medical industry to address health, disease and quality of life. In Materials, we focus on the elimination of hazardous substances in our value chains, contributing to improved human health. Within our own operations, we recognize our employees’ need for a safe and healthy working environment. See Strategy 2018: Driving Profitable Growth, People in 2016 and Review of business in 2016.

Malnutrition & nutrition security

The cost of malnutrition – in both human and economic terms – is vast. For DSM, malnutrition includes undernutrition resulting from the insufficient intake of micronutrients (vitamins and minerals) and overweight/obesity resulting from unhealthy diets. Nutrition security means access to food that is both calorifically and nutritionally sufficient to foster health & well-being. We have been developing and piloting affordable, nutritious food solutions together with the UN World Food Programme (WFP) and other partners for over ten years. We are now in the position to scale up some of these approaches through new business ventures. We are also growing our portfolio of ‘substitute’ food ingredients to address unhealthy diets (for example, yeast extracts as a replacement for salt and developing fermentative stevia as a replacement for sugar). This topic aligns with SDG 2 (Zero Hunger).

Emerging economies

The emerging economies, which continue to grow in influence, represent 80% of the global population and are seeing profound economic transformations that are leading to an unprecedented rise in urbanization. We see opportunities to improve lives in emerging markets through our Brighter Living Solutions as well as through our operations and supply chains. We aim to have a positive social impact on local communities through our respect for human rights, our insistence on fair working conditions and our inclusive approach to business.

Geopolitical tensions & inequalities

Unchecked tensions and inequalities could jeopardize economies, societies and communities, undermining efforts to achieve the SDGs. We monitor these macro risks, including trade and regulatory uncertainty, terrorism, political violence, and the threat of global recession, as they are relevant to our efforts at both short- and long-term value creation. This topic warrants inclusion due to its potential impact should tensions and inequalities heighten. The year 2016 was characterized by political uncertainty; any impact on global markets from developments such as Brexit will only become apparent in time.

Management approach. We address the potential impact of this topic through stakeholder engagement activities (such as the World Economic Forum (WEF), the UN Global Compact (UNGC) and the Dutch Sustainable Growth Coalition). Corporate Risk Management also monitors developments in this area. See Risk management.

Environment

Climate change & renewable energy

Recent international agreements highlight the global urgency of this topic. The ‘COP21 agreement’ to limit the impact of climate change to less than 2°C on average is legally binding and has been agreed by over 190 nations.

Observable changes such as the loss of sea ice, the accelerating rise in sea levels, and longer and more intense heat waves are already making themselves felt. We see tackling climate change as both a responsibility and a business opportunity. We are focusing on reducing our own carbon footprint through initiatives including increasing our use of renewable energy; enabling the low-carbon economy by driving innovations in upstream and downstream low-carbon solutions; and advocating action on climate in an appropriate manner by engaging in discussions on topics such as carbon pricing. This topic aligns with SDG 7 (Affordable and Clean Energy) and SDG 13 (Climate Action).

Management approach. We monitor metrics that impact on Climate change & renewable energy in the DSM Responsible Care Plan. Through the activities of our Materials and Advanced Solar businesses, we contribute solutions that are lighter, more durable, better-performing and have lower carbon footprints. Our engagement with stakeholder groups and climate advocates such as UNGC, the Carbon Pricing Leadership Coalition (CPLC) and RE100 influences public discourse on this topic. See 'Sustainable food systems' below, Planet in 2016, Nutrition and Materials.

Resource scarcity / Circular & bio-based economy

We support the move toward a circular, bio-based and sharing economy in response to growing resource scarcity. We see opportunities to innovate in both product and system design, and to investigate lower-impact business models, including sharing models that emphasize reusability, renewability and recyclability. This approach is most relevant to our Materials businesses; however, we also see opportunities to strengthen our work on nutrition security with circular concepts. This aligns with SDG 12 (Responsible Consumption and Production).

Management approach. We have identified the circular and bio-based economy as a sustainable growth area and will focus attention on opportunities in this area. The strategy and portfolio of our EBA DSM Bio-based Products & Services and new business ventures (such as DSM-Niaga) directly address this topic, which is a key driver in our Materials strategy and portfolio. See Planet in 2016, Materials and Innovation Center.

Water security

The issue of water security is playing an ever-more important role in the global development agenda. Due to the nature of our business, water availability and water quality represent a fundamental operational and reputational business risk for DSM. We established a context-based water target in 2015 to acknowledge that water issues are usually local or regional in nature. Our focus on sites in regions of water scarcity and sites that have a relatively high groundwater consumption or waste water discharge will ensure that appropriate measures are taken at site level.

Management approach. We are committed to the responsible use of water resources. The DSM Responsible Care Plan guides our approach to water. DSM is a signatory to the UN CEO Water mandate, and we voluntarily disclose our policy and performance on water as part of the Carbon Disclosure Partnership. Brighter Living Solutions and our Supplier Sustainability Program address this topic in the value chain. See also Planet in 2016.

DSM supports the UN CEO Water Mandate:

Water security for the world’s growing population is a global concern. Many areas in the world are facing water scarcity and pollution, as well as damage from natural disasters. Individual and collective actions are necessary to mitigate the adverse effects on water quality and availability. For DSM, the sustainable management of water within our own operations and along our value chain is a material topic. Thus we truly value initiatives such as the UN Global Compact CEO Water Mandate and its principles, and commit to reporting annually on our progress through this Report.

Feike Sijbesma, CEO/Chairman Managing Board

Sustainable food systems

As the global population continues to grow and a large proportion of mankind remains poorly nourished, the pressure on food systems to deliver more food and better nutrition is immense, causing in turn enormous environmental pressure. As a leading player in nutrition, we see it as our responsibility to help the world move toward more nutritious and sustainable food and feed solutions. This topic aligns with SDG 2 (Zero Hunger).

Management approach. Our Animal Nutrition & Health portfolio for the feed sector and new opportunities in sustainable plant proteins address this topic through products such as Clean Cow and the Green Ocean partnership. We also address the issue of food waste through our innovative packaging solutions and our food ingredient portfolio, which can increase the shelf-life and processing efficiency of certain foods. We pro-actively engage with relevant stakeholders on initiatives concerning this topic. See 'Brighter Living Solutions' and Nutrition.

Biodiversity

Diverse and healthy ecosystems are among the preconditions for a sustainable world. The variety of life on earth and the patterns of the natural world can influence the supply of ecosystem services such as food, water, and clean air. We believe that maintaining healthy ecosystems is important from both an operational and a reputation management perspective. The Natural Capital Protocol was launched in 2016. The protocol defines how companies can identify, measure, and value natural capital in a standardized way into business decisions and risk management.

Management approach. The DSM Responsible Care Plan outlines how we monitor and assess the impact of our operations on protected areas within our vicinity. We are exploring natural capital concepts via the Natural Capital Protocol development pilot to prepare for incorporating these into our future decision-making. We comply with the Convention on Biological Diversity protocols, which stresses the interconnection between biodiversity and climate change. Our position paper on biodiversity can be found on the company website. See also Planet in 2016.

Business Enablers

Open innovation

Open innovation helps companies to counter increasing competitive pressures and ever-shorter product life cycles. Companies that embrace it typically grow more quickly and generate more sales than their competitors. We see many opportunities to be gained from combining our own capabilities with the vast pool of ideas, know-how and expertise that are available outside DSM. Open innovation supports our sustainable growth areas and sustainability commitments and allows us to work together with suppliers, customers and other partners to create new solutions in a collaborative way. We see the role that open innovation and new technologies can play to help the world to deliver on the SDG commitments. For example, we are currently drawing on the knowledge of scientists around the world to scale up renewable energy solutions through our Bright Minds Challenge.

Careers & employment

We aim to provide rewarding career opportunities, high levels of employee engagement, a healthy work-life balance, and a diverse workforce in which individual differences are respected. We follow trends in careers & employment to adapt our organization to changing needs, so as to unlock the full potential that the right employees can make to our company, and to ensure that our employee base continues to match DSM’s capability requirements as these evolve over time.

Management approach. Our HR strategies and policies prepare for changes such as the increasing age of the world’s population and the growing use of technology. We apply the International Labour Standards of the International Labour Organisation. Lastly, we address the issue of fair pay in our supply chain through our Supplier Sustainability Program. See 'Suppliers' in this chapter and People in 2016.

Advocacy & reputation

Companies are increasingly asked to define how they are contributing to a better world, and business leaders are increasingly becoming advocates on critical issues. For DSM, advocacy means interacting with government, policymakers, industry associations and societal interest groups on topics of mutual interest to create a receptive environment for the solutions we offer. We encourage legislators to promote competitiveness, sustainability and innovation.

Management approach. Our reputation underpins our license to operate with stakeholders both within and beyond our direct value chains. We are a vocal advocate on policy issues including action on climate change, malnutrition & nutrition security, and the circular economy, as these topics are of particular relevance to our strategy and our sustainable growth areas. We actively manage our sustainability profile, and ensure that we take care of our own operations (for example, regarding emissions and pollution), in order to support our reputation as a sustainable company. See also Stakeholders.

Trade barriers

This topic is closely linked with ‘Geopolitical tensions & inequalities’. DSM actively follows international geopolitical developments and the consequences for the trade barriers affecting its operations, which include import and export trade controls, legislation on strategic goods, sanctions and embargoes, sanctioned parties, restricted chemicals, and technology controls. During 2016, the options linked to the entry into force of the Joint Comprehensive Plan Of Action were elaborated. Other lifted sanctions opened new market possibilities, while additional sanctions imposed on conflict areas have not affected DSM yet.

Management approach. The DSM Code of Business Conduct defines the core of our approach to this topic. Through our Supplier Code of Conduct and contracting practices, we manage this topic in the Supply Chain. Trade Control Compliance is managed through our standard business processes.

Digital transformation

Digital transformation is a megatrend that will profoundly change the way companies operate in years to come. For DSM, this change is seen in three main areas: manufacturing, marketing & sales, and careers & employment. Digital transformation is also expected to disrupt many of our end-markets, such as health and automotive. Within health, the opportunities for patient engagement through precision medicine and medical printing will change the way the health profession operates. In automotive, assisted driving or self-driven vehicles represent the future. The rise of 'big data' brings with it business opportunities and risks (such as privacy and cyber security).

Management Approach. The digital transformation is identified in DSM's Strategy 2018: Driving Profitable Growth as one of the megatrends to which we are responding. Big data is being developed as a competence in the R&D and IT disciplines that support our business and functional needs. Our Privacy Policy and Information Security Office work to protect our information assets.

Governance

Responsible business practices

Doing business in a responsible way, and complying with the many relevant laws and regulations, provides us with the license to operate in our dynamic, international environment. Responsible business practices cover a wide category of subjects including corporate governance, human rights, labor policies, Safety, Health and Environment (SHE) practices, competition law compliance, trade controls, anti-bribery & corruption measures, and privacy.

Management approach. Our approach to this topic is covered in our Code of Business Conduct and, for the supply chain, our Supplier Code of Conduct and Supplier Sustainability Program. Our Human Rights Policy, due diligence practices and HR policies cover the People-related aspects of this topic. See Suppliers, People in 2016 and DSM Code of Business Conduct.

Transparency & reporting

We transparently report to meet the needs of diverse stakeholders, such as employees, customers, investors, governments, civil society and local communities on topics including tax payments, disclosures on the environmental and social impacts of our solutions, and remuneration of the Managing Board. The year 2016 saw increasing investor requests concerning climate disclosure and customer requests for additional supplier information, especially concerning human rights, as well as expectations on a global scale for reporting on our contribution to the SDGs.

Management approach. We address this topic through the publication of an Integrated Annual Report (published since 2010) and the annual Corporate Social Responsibility (CSR) report in China (published since 2007). The application of financial and non-financial reporting guidelines and disclosures such as IFRS, GRI and CDP and ranking in investor questionnaires and indices such as the Dow Jones Sustainability World Index (DJSI) foster external confidence in our approach.

Product & food safety

Product & food safety is highly relevant to DSM as an operational and reputational business risk and provides excellent opportunities to differentiate our product offering. The risks include the potential negative impact of product recalls, product contamination, health risks related to nanotechnology during handling, for instance, and regulatory restrictions.

Management approach. This topic requires us to have practices in place to ensure ingredient and substance quality, and covers the production, handling, preparation, storage and use of DSM solutions in ways that prevent risks to health & wellness. We see opportunities for differentiation with our management of Product & food safety through our Brighter Living Solutions program and Product Stewardship strategy. See 'Brighter Living Solutions' and Product Stewardship .

Taxation

In 2016, corporate tax avoidance figured once more in the news headlines, and civil society continues to press for corporate tax transparency and reform. We believe that a responsible approach to tax is integral to business sustainability. We view the fulfilment of our tax obligations as part of the process of creating long-term value for all our stakeholders.

Management approach. Our tax position is consistent with the normal course of our business operations and reflects our corporate strategy as well as the geographic spread of our activities. DSM strives to be compliant with the letter and spirit of national and international rules, regulations and best-practice guidelines (such as the OECD Guidelines for Multinational Enterprises) and operates in line with the arm’s length principle.

DSM supports the idea of a global solution for fair tax policies and systems. We therefore closely monitor and provide input on the OECD initiative on Base Erosion & Profit Shifting. DSM is transparent toward tax authorities in all the countries in which it operates, and works closely together with them to determine the amount of tax due.

DSM’s contribution to society includes the provision of employment to more than 20,000 people around the world. In addition to corporate income taxes, the company pays many other taxes, including payroll taxes and social security contributions on the wages of its employees, value added taxes, customs duties, property taxes, etc. All these taxes are a significant source of funding of public services by governmental institutions at several levels worldwide. DSM sees it as its responsibility to contribute to this.

Our Managing Board is responsible for establishing the company's approach to taxation under the supervision of the Audit Committee of the Supervisory Board. Proper organization, procedures and processes are in place at DSM between Group Taxation, the business, and other support functions and functional excellence departments. The aim is to create a strong interconnection in order to keep everyone aware of relevant tax legislation and to ensure compliance. Compliance with both direct and indirect tax matters is monitored through a Tax Control Framework in order to achieve an effective, efficient and transparent tax function. The Tax Control Framework is a tax risk management and control system which ensures that Group Taxation is aware of the worldwide tax risks for the company. Group Taxation possesses sufficient insights to adequately manage these risks. The key stakeholders in the Tax Control Framework are well established and include the Supervisory Board, Managing Board, Executive Committee, Group Taxation, business, external auditors, as well as the tax authorities in countries where DSM is operating. For further detailed information, see ‘Taxation at DSM' on the company website.

Bioethics

New or unfamiliar technologies can trigger ethical discussions about their implications for public health or the environment. Consumer acceptance of new technologies cannot be taken for granted, so addressing safety and other potential concerns is a top priority for us. We firmly believe that biotechnology can offer unique solutions to global challenges related to the world’s growing and aging population and the depletion of fossil resources. Our latest consultations with stakeholders show that the debate now focuses on the role Genetically Modified Micro-organisms (GMMs) might be able to play in nourishing the world's population by 2050.

Management approach. We manage this topic through active consultation with the scientific community, industry, NGOs, governments and the general public. Our safety assessments are science-based and transparent, enabling authorities to fairly assess and approve our innovative technology and resulting GMMs. DSM uses GMMs as tools for the manufacture of a range of products. DSM does not sell GMMs or products containing GMMs. All GMMs are contained within our production processes. See also our position paper on biotechnology on the company website.

Stakeholders

DSM’s various stakeholders – both those within our value chain such as suppliers and customers, and those that influence our business operations, such as investors, governments and civil society – have thoughts and views that must be balanced against our own strategic objectives and focus areas.

We appreciate the open dialogue we have with our stakeholders through a variety of channels. It equips us to respond to the needs of society and to create shared value for all our stakeholders.

In the following pages, we present how DSM engages with external stakeholders, including the partners in our value chain. Information on how DSM engages with its own employees can be found in People in 2016.

- In September, DSM organized an Investor day in Charleston (South Carolina, USA) to give US-based investors deeper insights into the underlying growth and earnings profile of the company’s Nutrition and Materials businesses.

- DSM engaged in dialogues with investors and their representatives on topics such as climate strategy, social supply chain management, natural capital and responsible taxation, which helped foster mutual understanding around respective sustainability focal points.

- DSM broadened its biotech engagement, becoming a member of both the Engineering Biology Research Consortium and the MIT- Broad Foundry in 2016. In Materials, engagement in the year included the Materials Research Laboratory/Complex Fluids Design consortium of the University of Santa Barbara (California, USA), and the iPrime consortium of the University of Minnesota (Michigan, USA).

- DSM was the innovation partner of the 2016 Sasol Solar Challenge-winning Nuon solar car, and we supported the Dutch-based team with our light-trapping technology.

NGOs and civil society - DSM works together with other organizations to jointly find solutions to societal challenges

Meetings, discussion panels, philanthropic events

- In India, in partnership with the Indian Academy of Pediatrics, HealthPhone and Vodafone, DSM launched the Poshan cards program. The program supports the Indian Government’s mission to combat malnutrition and micronutrient deficiencies among mothers and children by providing information to pregnant and lactating women. This unique public-private partnership uses technology as an enabler and is expected to positively impact the lives of more than 1.5 million women.

Communities - a good relationship with parties that are geographically close to DSM's operations is important to maintain the company's license to operate

Open days, news bulletins, social media, education, support through local initiatives

- In North America, DSM committed to help mitigate the current refugee crisis by setting up employee volunteer English language programs and cultural training, hiring employees and working with groups such as Upwardly Global on refugee and immigration issues.

Governments - DSM engages with governments individually, as part of coalitions or through its memberships of relevant trade associations

Meetings with officials, position papers on the company website, case studies, letters, reviewing proposed legislation, engagements in trade associations

- DSM engaged with the European Commission, Members of the European Parliament and Member States on reviewing the Circular Economy Package and the Bio-economy Strategy in 2016.

- DSM advocated the importance of Mission Innovation to the government of the Netherlands, a global initiative to double public investments in energy innovation by 2020, resulting in the Netherlands signing up to the initiative.

- DSM’s new business ventures and innovations (such as Niaga®, Decovery® and advanced biofuels) were presented at events such as the European Business Summit, the European Retail Round Table, and the European Forum for Industrial Biotechnology and the Bioeconomy, leading to more exposure within Europe.

- DSM participated in Startup Fest Europe, held under the patronage of its Chairman, Prince Constantijn van Oranje. DSM was one of the companies hosting a section of the event dedicated to energy solutions.

Partners in the value chain

Customers

Customers drive our business. They are our most important partners for realizing both our strategic growth ambitions and our vision to improve the lives of people today and for generations to come. Customers buy our solutions to create consumer-facing products, or to distribute our own consumer products through their various channels.

We do our utmost to strengthen DSM's commercial and strategic relationships with customers. We work together to provide the solutions they are seeking while offering them an exceptional customer experience. Our customer-centric approach is manifested in various ways:

To meet individual customer demands, we apply customer segmentation to ensure that value propositions and service levels are in line with our customers’ strategic ambitions.

Developing consumer insights together with our customers is crucial for driving new business developments that meet consumer needs. For example, DSM Personal Care has developed a new methodology that enables the personal care industry to visualize the effectiveness of facial skin moisturization and helps it to demonstrate and test the effectiveness of its skin products. The new method came about through our epidermal science platform CORNEOCARE™, in cooperation with partners from industry and academia.

We have implemented a key account approach to build relationships with customers and ensure that we reach mutually agreed goals. The customer executive sponsorship program, launched in 2014, has resulted in co-developments in all our industries. We co-develop solutions with customers to jointly implement customer- and consumer-driven innovations. For example, in 2016 we partnered with Nexeo Solutions, a global chemicals and plastics distributor, to bring new, high-value performance filaments to customers who perform 3D printing using fused filament fabrication (FFF) technology.

The 3D printing sector, and particularly its FFF segment, represents an exciting, high-growth market with new found potential. Partnering with DSM means we can be sure that our customers will have access to an innovative new range of products specifically developed for 3D printing.

Jérôme Abrahmi, VP EMEA at Nexeo

With our strong science base as a differentiating factor, we share our knowledge at conferences and trade shows and ensure that our valuable insights are accessible to our customers and partners through relevant platforms, communities and our sales force.

A skilled sales force is crucial for ensuring the best customer experience and personalized interactions. All our sales people are selected on the basis of their industry experience and knowledge, and we invest in their continuous development. For example, we have partnered with a leading business school to launch a learning portal and training program for our Marketing & Sales professionals.

Digital transformation is allowing us to further optimize customer and consumer interactions by strengthening our global online presence (both through websites and through social media) to improve our outreach. For example, DSM Dyneema integrated the customer relationship into its web presence through its ‘Where to Buy’ connections. This not only shows our strong relationship with our customers but also generates leads for them.

The success of our customer-centric approach is measured through the use of Net Promotor Score® (NPS). In 2016, DSM increased its overall NPS score to 38 (in 2015: 35), which ensures that it remains one of the leading companies in its sector. In the B2B space, an NPS score in the 30s is considered high. A three-point increase on this is a significant achievement and testifies to our drive to continuously improve in response to customer feedback.

DSM considers its brand an important business asset and aspires to be a company with a strong brand and reputation for providing innovative and sustainable solutions that fulfill the needs of its market segments and society. DSM's brand value as assessed by Brand Finance has grown considerably over the last five years and for 2016 was valued at €650 million. The decrease versus prior year was primarily attributable to the portfolio changes that took place in 2015.

Suppliers

DSM needs to be smart in how it engages with its 40,000 suppliers. We do this through a Supplier Sustainability Program (SSP), which is implemented through annual supplier sustainability plans and sustainability roadmaps. Progress against targets is shared on a quarterly basis within DSM Sourcing and also with the Managing Board. The Supplier Sustainability Plan 2016 addressed a number of relevant topics for the materiality matrix: Resource scarcity/circular & bio-based economy, Responsible business practices, and Climate change & renewable energy.

DSM Supplier Sustainability Program

Supplier Sustainability Program strategy

DSM’s SSP consists of two main elements: compliance and solutions. By means of the compliance program we have been able to very clearly define how we choose to do business with our suppliers. We have invited suppliers to contribute to our competitiveness in areas of sustainability, innovation, business growth, security of supply, new business models and strategic alliances. This occurs via our 'better business' projects and other initiatives.

In 2016, DSM assessed the maturity level of its SSP along four dimensions: Strategy/Plan; Supply Risk & Opportunity; People, Infrastructure & Measurements; and Processes. The maturity assessment was used to indicate areas of improvement to meet the ambition level for 2020. The SSP was also benchmarked against the practices of other leading sustainable companies. The results of the benchmark and the maturity assessment were incorporated in the Sustainable Purchasing Roadmap 2016-2020, which aims to anchor sustainability even more firmly in DSM’s daily sourcing activities.

Internal skills and capabilities

Internal capability-building continued in 2016. Further training in sustainability was provided to the sourcing community. The trainings offer practical tools on integrating sustainability into the daily work of sourcing professionals. The Strategic Sourcing Award and Key Supplier Management Award highlight sustainability as a key topic in selecting the winners.

Collaboration

DSM works with external partners to enhance collaboration in the supply chain. These include the Roundtable for Sustainable Palm Oil (RSPO), Together for Sustainability (TfS) and the Dutch consulate in China.

While palm oil is only used on a very limited scale by DSM, RSPO membership is important due to the potential risks to the environment, human rights issues and labor practices in the palm oil supply chain.

DSM has 'Friends of the Sea' certification for over 98% of its fish oil purchases and ensures that the fisheries involved in providing fish oil for the production of its omega-3 product range are sustainable.

We are collaborating with the Dutch consulate in China in a project that focuses on sustainable supply chains in China. The Consulate General of the Netherlands in Shanghai partnered with two professional CSR advisors, China National Textile & Apparel Council and Solidaridad China, for this three-year CSR project. Within the framework of the project, a Sustainable Supply Chain Management Platform for Dutch Businesses in China was established, providing a training program focusing on topics such as EHS (Environment, Health and Safety), CSR management system, and labor issues. In 2016, 16 Dutch brands and 54 local factories (suppliers of the Dutch brands as well as member companies of Jiangsu Federation of Industry and Commerce) participated. DSM has nominated four suppliers to join this initiative.

Compliance

DSM's approach to compliance is via the Supplier Code of Conduct (SCoC), comprising assessments and audits to check that suppliers act in compliance with the norms and values of DSM. Where a risk or breach occurs, DSM works with suppliers to define and execute an improvement plan. If non-compliance still persists, DSM may choose to terminate the relationship with the supplier. In 2016, 96% of DSM’s spend was covered by the SCoC. Since 2015, sustainability compliance has also been integrated into our standard supply risk management approach and new supplier onboarding process.

We focus on approximately 1,000 critical suppliers, defined as those that provide critical components, are located in potentially high-risk countries, supply a high volume of products or services, are non-substitutable, or have the potential to create shared value in areas of innovation and sustainability.

Since 2015, we have been actively collaborating with TfS. Founded in 2011, TfS now has 19 members (and rising) and aims to develop and implement a global audit program to assess and improve sustainability practices within the chemical industry's supply chain. TfS works with EcoVadis, a recognized provider of CSR ratings, to implement the program. The EcoVadis methodology is aligned with international standards and supervised by a scientific committee. This collaboration gives DSM access to assessments and audits which are executed by other TfS members and shared on the TfS platform. This collaboration enabled DSM to screen approximately 4,200 suppliers in 2016, resulting in 1.4% being identified as 'suppliers at risk'. In line with internal follow-up guidelines, these will be further investigated by means of an on-site audit of their facilities so as to ensure that improvement plans will be made. DSM was able to screen 7% of new suppliers with regard to their environmental performance, impact on society, human rights and labor practices. The average EcoVadis sustainability performance score of DSM’s supply base improved by 2% in 2016. The average of the supplier performance level indicates that our suppliers are engaged with sustainability.

The collective (potential) supply base of the TfS members has been rated by 6,383 EcoVadis assessments and 724 TfS audits. In 2016, a total of 1,773 sustainability assessments were shared among TfS members and 241 new TfS audit reports were received by the initiative.

Supplier Sustainability Program results

2016

2015

Target

Achieved

Leverage TfS pool1

Target

Achieved

Leverage TfS pool1

Spend coverage SCoC

91%

96%

-

91%

95%

-

Sustainability assessments

200

200

996

200

252

690

Sustainability audits2

20

20

105

20

10

27

Quality audits

-

241

-

251

-

Solutions

36

50

30

46

-

1 Total number of DSM suppliers assessed by TfS members

2 The lower target set for Sustainability audits in 2015 resulted from DSM’s membership of TfS

Moving beyond compliance

Our collaboration with TfS and partner EcoVadis gives us insight into the compliance of our supply base with our sustainability criteria. Beyond this, we will look to increase transparency regarding the incidents involving our suppliers using a 360-degree monitoring process that includes insights from online news sources on positive or negative CSR developments on the part of the suppliers we assess. As a first step, the suppliers screened in 2016 were assessed on legal and financial sanctions of any scale whatsoever. The area of labor and human rights currently trends as being of highest concern among those assessed.

Better business

While compliance remains the cornerstone for achieving a sustainable supply base, procurement activities will increasingly focus on so-called ‘better business’.

As part of our drive to foster better business through our supplier solution projects, DSM's Sourcing organization engages in proactive dialogue with suppliers in order to move the business agenda forward on topics such as climate change, food & nutrition security, health, and the circular economy. In this context, Sourcing pursues initiatives to create joint value, awareness and engagement in areas related to Brighter Living Solutions.

We continued to engage in joint initiatives with suppliers that led to environmental benefits in the value chain, such as projects in packaging, logistics, and reduction in raw materials and carbon emissions. Via the CO2 Emission Reduction Initiative, the physical distribution team investigates suppliers’ footprints in road transportation, marine and packaging to explore opportunities for improvement. This is a continuation of the Green Tender Initiative that began in 2012 with the aim of achieving a 20% reduction in emissions associated with logistics and packaging. Since 2012, over 30% of our global spend on physical distribution has been covered by the Green Tender Initiative. The cumulative CO2 emission reduction compared to 2010 reached 15% at the end of 2015, the latest reporting period.

We use carbon pricing of €50 per ton CO2 equivalents (CO2eq) internally to evaluate our industrial gas purchases. By embedding the internal carbon price in the template RFQ for industrial gases, we make our sites more aware of the financial impact of industrial gas supply. The carbon price for two cases in Switzerland and the Netherlands had an impact of 2-4% and 17% on the total cost of ownership, respectively. In Switzerland, this confirmed that our chosen supplier was the correct business decision. In the Netherlands, the difference between the best solutions was not significant enough to influence the decision making although it showed a significant improvement over the existing situation. Business managers agreed that the inclusion of the carbon price had an added value for the RFQ process.

DSM Nutritional Products’ Purchasing team has been working on replacing an 18% hydrogen chloride (HCl) solution used at its Dalry site (UK) with a more concentrated solution, which will be diluted on site. This obviously has more than mere economic benefits, as transportation can be significantly reduced by diluting the HCl on site, rather than transporting the water component of the solution across the north of the UK. The annual environmental impact will be a saving of some 560 tons of CO2eq emissions, equivalent to planting 15,000 trees.

BICEPS: Leveraging shared capabilities for a better world

Ninety percent of global trade goes by sea, and every day 100,000 vessels ply the oceans. Thirty percent of DSM’s transport is seaborne, so some 40,000 box containers a year journey either between our own plants or to our customers. We have reduced the carbon footprint of our own distribution activities through supplier collaborations and modality switches, but with 20 million containers in circulation, our ability to effect direct change is limited.

DSM partnered with AB InBev, AkzoNobel, Friesland Campina and Huntsman to form the BICEPS Network (BICEPS: Boosting Initiatives for Collaborative Emission reduction with the Power of Shippers) with the aim of developing a common approach to sustainability in the global procurement of ocean freight and the selection of shipping lines.

The network uses the BICEPS Rating System, which analyses the sustainability performance of shipping lines in five categories: communication and reporting on sustainability, emissions and target-setting, improvement projects, cross-modality collaboration, and long-term ambitions. The rating is used as a criterion in the selection of shippers, but also as an encouragement to sustainable development. It furthermore enables small-scale innovators in the industry to connect directly with the shipping lines. Together with the network, we can achieve greater emissions reductions than if we operated alone.

Collaborative platforms and networks

We collaborate with like-minded peers within cross-sector platforms and business networks to develop social and environmental measurement and performance standards, to find new opportunities within our sustainable growth areas, and to act as advocates on material topics such as climate change & renewable energy, nutrition, the circular economy, and natural and social capital. Below, we describe our engagement with some of the most significant global, partnership-based strategic initiatives.

World Economic Forum (WEF)

As a strategic partner, we attended WEF meetings throughout 2016, including the Annual Meeting in Davos. We strengthened our presence at regional meetings, including in Africa and Latin America, to bring visibility to important DSM partnerships and initiatives concerning nutrition and climate change.

In June, our CEO Feike Sijbesma co-chaired the Annual Meeting of the New Champions in Tianjin (China) and led roundtable sessions about pioneering the circular economy, implementing the climate deal, and the impact of the fourth industrial revolution.

We continued our engagement in WEF CEO Climate Leaders, specifically around carbon pricing. Together with the WEF, the CPLC and Yale University, we initiated a learning track on internal carbon pricing, with the launch of a webinar series. Our CEO Feike Sijbesma and CFO Geraldine Matchett featured in the first webinar, which was about ‘Practical experiences from the private sector’.

World Business Council for Sustainable Development (WBCSD)

We co-chaired the WBCSD Reaching Full Potential group, with − among others − Solvay, BASF, AkzoNobel, Evonik, Eastman, Henkel, and SABIC. A guidance on Social Life Cycle Metrics for the Chemical Sector was published in November.

Together with leading businesses and top accounting firms, we participated in the WBCSD Social and Natural Capital project. The project aims to foster simple and practicable methods for monetization. Our contribution has led to the publication of methods for monetizing safety, skills and employment.

As part of the WBCSD Product Sustainability Assessment group, we have been aligning with our peers on portfolio steering methods, with a focus on hazardous substances and toxicology, and building on Life Cycle Assessment (LCA) and product social metrics methodologies.

Within the Low Carbon Technology Partnerships initiative (LCTPi) − a multi-stakeholder platform led by the WBCSD that presents the opportunities of large-scale development and deployment of low-carbon technologies − we helped set up the new global campaign ‘below50’. This campaign unites companies that produce, use and/or invest in fuels that are at least 50% less carbon-intensive than fossil fuels. The aim is to promote the best sustainable fuels that can achieve significant carbon reductions, and to scale up their development and use.

A DSM executive has been seconded to the WBCSD to set up the Food Systems Transformation program to address the key challenges of food systems. Our material topic Malnutrition & nutrition security is being addressed, including sub-topics such as obesity, calorie & nutrient balance in food, and sustainable protein supply.

Accounting for Sustainability (A4S)

Our CFO Geraldine Matchett continued her active role in the A4S CFO Leadership Network, with a focus on topics such as the importance of having a comprehensive conversation with investors on long-term value creation, as well as the importance of actively engaging the finance function internally on the value of sustainability as an essential component of good enterprise management.

We continued to contribute to A4S projects through the participation of our experts in both its finance and sustainability teams. The main focus was the completion of the project ‘Integrated management reporting’, to help business embed environmental and social considerations into (internal) management reporting in order to enhance decision making. We shared our own best practices, such as linking performance management and remuneration with sustainability targets, and also gathered new insights from other A4S members into the topics they discuss in their wider interactions with the financial community.

Carbon Pricing Leadership Coalition (CPLC)

In April, our CEO Feike Sijbesma was appointed Co-Chair of the High Level Assembly of the CPLC. The CPLC’s long-term objective is for carbon pricing to be applied throughout the global economy. In addition to facilitating leadership dialogues, the CPLC will also mobilize business support to put an internal price on carbon. As Co-Chair, Mr. Sijbesma shared DSM’s experience with applying an internal carbon price of €50 per ton CO2eq when reviewing large investments, and called on businesses to do the same.

Ellen MacArthur Foundation

We continued our engagement with the Foundation, participating in Project Mainstream, a global multi-industry initiative to accelerate business-driven innovation to help scale up the circular economy. We contributed to ‘The New Plastics Economy: Rethinking the future of plastics’, a publication which provides a vision of a global economy in which plastics never become waste, and which outlines concrete steps to achieve this systemic shift.

We offered employees an internal training program on the circular economy delivered by CE100 and Bradford University (UK).

RE100

We continued our engagement with RE100 during 2016 and participated in the learning opportunities that are available through this peer-learning, advocacy and action platform, which is led by the Climate Group.

As part of our RE100 commitment, we joined forces with AkzoNobel, Google and Philips in a long-term commitment to jointly source power from renewable energy projects in the Netherlands. The first agreement − to buy power from Windpark Krammer in the province of Zeeland − will cover approximately half of DSM’s bought-in electricity requirements in the Netherlands. See Planet in 2016.

Dutch Sustainable Growth Coalition (DSGC)

We continued our engagement with the DSGC, with a focus on the SDGs. As co-initiator of the Dutch SDG Charter, we used the coalition to raise the profile of the Charter and encourage more Dutch companies to commit to joint action on SDGs of national priority.

In December, we facilitated a masterclass as part of a conference on the SDGs, in which students shared their ideas on how to engage with the financial sector to drive and finance improvements and innovations in renewable energy technologies, rather than scaling up existing renewable energy technologies alone.

Cross-sector nutrition partnerships

As a leading micronutrient provider, DSM develops innovative solutions for improved nutrition. In order for these solutions to have the broadest reach, we work with partner organizations that have direct access to beneficiaries. DSM’s nutrition partnerships focus on the following objectives: wider base of scientific evidence and endorsement; increased market for nutrition products; and improved employee engagement.

DSM’s partners range from UN agencies, governments, academia and NGOs to industry peers. We commit support through financial and non-financial means including time, technical expertise, products and volunteers. DSM’s main partners are described below. For a more extensive list and description of DSM’s other nutrition platforms and partnerships, see the company website.

Philanthropy and sponsorships

DSM continues to be recognized by the business world, government, civil society and the academic community as a respected thought leader in clean energy, climate change, nutrition and the circular economy. Besides striving for excellence in sustainability-oriented innovation, we also engage in classic philanthropic and sponsorship activities in support of non-governmental and civil society organizations. In 2016, DSM donated more than €2.5 million to a range of initiatives. DSM makes no political donations, as outlined in its Code of Business Conduct, the text of which is available on the company website.

The Ocean Cleanup

DSM is a partner and sponsor of The Ocean Cleanup, a non-profit foundation launched in 2013 with the aim of developing sustainable and scalable technologies to help solve societal problems, including the issue of waste plastics in the world’s seas. Founded by the young Dutch entrepreneur Boyan Slat, The Ocean Cleanup has developed a prototype floating barrier system – described by TIME magazine as “one of the world’s best inventions in 2015” – that uses the ocean’s natural currents to round up and concentrate plastic waste. Consistent with our company focus on sustainability and environmental innovation, we were pleased to lend our materials expertise to The Ocean Cleanup. We are supplying Dyneema® material to maritime rope supplier Lankhorst Ropes, and together providing the key technology for the barrier’s mooring system.

China

DSM hosted the Bright Experience Event to support the goal of ending hunger and malnutrition in 15 cities across China during 2016. These events aimed to raise awareness of, and funds for, the issue of child hunger and malnutrition. They attracted 2,500 DSM employees and their families, as well as partners at 16 sites located across 15 cities, including Shanghai and Beijing. The money collected at the events will be donated to the WFP’s School Feeding Programmes worldwide and the China Foundation for Poverty Alleviation. Through the project, we provided more than 50,000 nutritious meals containing milk and eggs to children in poor areas of western Chinese provinces.

India

DSM committed more than €76,000 to sponsoring and supporting civil society and non-governmental organizations in India in 2016. Most of these initiatives focus on the state of Maharashtra, which has over 112 million inhabitants. Most DSM activities targeted the Pune, Thane and Palghar districts. We are raising awareness of nutrition in partnership with the Indian Academy of Pediatrics. The central topics of the collaboration are eradicating malnutrition and promoting preventive healthcare in these districts. Together with the ISKCON Food Relief Foundation, we support the mid-day meal program of school children in Maharashtra in order to help eradicate hunger.

North America

The DSM North America Employee Relief Fund is a group funded and run by DSM employees to help their fellow employees who suffer severe losses as a consequence of natural disasters. In 2016, the group helped fellow employees recover from Hurricane Matthew.

DSM provided USD 44,000 to the leadership development organization Global Health Corps and the non-profit organization 1,000 Days to underwrite the cost of two Global Health Corps Fellows working at 1,000 Days to create an educational campaign about the importance of nutrition. The two Fellows are helping raise awareness of malnutrition and delivering cost-effective interventions to address micronutrient deficiencies among underprivileged families in New Jersey, USA.

Sight and Life

The Sight and Life foundation champions a world free from malnutrition and aims to improve nutrition of the world’s most vulnerable populations. Through continued support of the Sight and Life foundation, DSM furthers the advancement of research, implementation science, and leadership capacity development in nutrition.

The Sight and Life foundation engaged in an exciting public-private partnership in Ghana, known as Affordable Nutritious Foods for Women (ANF4W), working to establish a market-based solution to improve the nutritional status of women of reproductive age with fortified food products. In addition, Sight and Life joined forces with PATH, a non-profit organization charged with global health innovation, and local partners to develop a program promoting good hygiene habits and delivering a nutrient rich meal of fortified rice to 2,600 schools in India. To encourage innovation in the nutrition landscape, the Sight and Life foundation developed the Elevator Pitch Contest, a unique forum for young innovators in nutrition to make their case on why their ideas deserve funding.

With the right mix of funding, knowledge, technology, and enabling policy, Sight and Life advocates with its partners the global fight against malnutrition and micronutrient deficiencies.

External recognition

We are proud whenever our sustainability, quality and innovation efforts, either as a company in general or specific to our individual products and solutions, are recognized by the outside world. Below is a selection of some of the awards and other forms of recognition that we received from non-governmental and trade organizations, customers, suppliers and academia in 2016. Other awards and external recognition for our business groups can be found in Review of business in 2016. A full list of our recognitions can be found on the company website.